Las Vegas Raids the Taxpayer to Bring in the Raiders
September 5, 2017
This piece was published in the Spectator on August 30, 2017.
Beer bottles, discarded torn clothing and other debris dot the landscape at the corner of Russell Road and Dean Martin Drive. In the distance, to the northeast, the Strip looms — a pyramid, a castle, a faux Empire State Building.
Behind the chain-link fence looms open desert covered in patches by ground-covering shrubs. It’s a nondescript location on this 114-degree June day, but in mere months construction should begin on the new home for the National Football League’s (NFL) Raiders. This will be the world’s most costly stadium, built heavily on the backs of taxpayers.
Intended to be ready to kickoff the 2020 season, the projected $1.9 billion stadium will receive a record taxpayer subsidy of $750 million. That’s the biggest bite yet for taxpayers in the game of luring sports teams with the bait of public handouts.
Lucas Oil Stadium used to be the biggest handout recipient with taxpayers spending $619 million in 2008 to house the Indianapolis Colts. The Atlanta Falcons, coming a close second to Indianapolis, are currently enjoying nearly $600 million in taxpayer cash for the team’s new Mercedes-Benz Stadium and improvements to a parking garage. But move over Indianapolis and Atlanta, Sin City will be the new king of stadium subsidies.
Tax the tourists
As with many taxes for stadium support, tourists will largely pay the costs for the Las Vegas Stadium. The Nevada Legislature passed a lodging tax increase quickly in a 2016 special session to raise the revenue for the public subsidy when the NFL came calling.
Visitors to hotel rooms on the Strip (and nearby hotels to the west and south) now pay an additional tax of 0.88 percent, increasing the average nightly rate by $1.50.
The increase is 0.5 percent for rooms within the rest of the stadium district, a 25-mile radius around the Clark County Government Center downtown.
That philosophy is in lockstep with the general taxation philosophy in the Silver State, where residents enjoy no state income tax and low property taxes thanks to coffers filled with revenues from various taxes that mostly affect tourists. Tax revenue from lodging, gambling, alcohol and entertainment make up nearly half of the state’s general budget.
A future slush fund?
The law mandating the increased room tax has no sunset provision, meaning the tax boost won’t go away unless lawmakers create another law ending it.
And bureaucrats have already hit the jackpot, with early returns higher than expected. About $8.4 million was collected the first two months the tax was in effect, or about a half-million more than the $7.9 million estimated by the SNTIC last year.
Extra money will go to the stadium authority to spend on stadium-related costs, including security and upkeep.
“Two months really don’t make much of a trend, but it’s better to start ahead than behind,” Stadium Authority Chairman Steve Hill said after a recent meeting of that panel. “We intended to be conservative and did not want to overestimate in order to inflate the numbers and make it look easier that it potentially could be.”
Michael Schaus, communications director for the Nevada Policy Research Institute, expects the tax to remain in place as a slush fund, as government officials find other reasons to spend that money in the future once the stadium is paid off.
“This is a good example of them saying we need to raise taxes for ‘x’ purpose and really they just want to raise the taxes in perpetuity,” he said.
Bill Robinson, an assistant professor of economics at the University of Nevada-Las Vegas, anticipates the same, pointing to a recent exposé of lavish spending at the Las Vegas Convention and Visitors Authority, which receives plenty of taxpayer money for its budget, by the Las Vegas Review Journal.
“The dark side of Vegas is that once something gets going it’s sometimes hard to keep track of where the money is going,” Robinson said.
‘We don’t expect sports deals to be fair’
The lease that the Las Vegas Stadium Authority, created by the law that OKed the public financing of the stadium to oversee the facility, signed with the Raiders is — like many stadium deals — generous to the team.
The team will pay zero rent to use the stadium under the 30-year contract and will also pay no property taxes. That provision will save the Raiders at least a half-million dollars per year.
Although the public will fork over $750 million for the construction, taxpayers do not get any stadium revenues in return for that investment.
Neil deMause, an expert on stadium subsidies who penned the book Field of Schemes, wrote on his accompanying website that the deal could have been worse, since it doesn’t feature a “state of the art” clause, which precipitated the Rams move from the so-so Edward Jones Dome in St. Louis last year to a gleaming new facility in Los Angeles now under construction. (That facility will also house the Chargers, who ditched San Diego when voters refused to pass a ballot measure that would raise hotel taxes to fund a new stadium there. Unlike Las Vegans, San Diegans got the opportunity to make their opinions known on the issue.)
“This isn’t quite as bad a lease as I’d feared — a state-of-the-art clause would have been a real disaster, since it would have allowed the Raiders owners to demand future upgrades in a decade or two under threat of moving again — but it’s still not very good for taxpayers,” deMause wrote.
Robinson said taxpayers have become accustomed to taking it on the chin.
“We don’t expect sports deals to be fair,” he said, the Stratosphere looming in the distance outside his office window. “Professional sports wouldn’t survive without subsidies.”
Just look at Oakland, the city the Raiders will soon leave. Alameda County taxpayers are still $83 million in debt to pay off a 1995 renovation to the Coliseum stadium made to lure the team back from Los Angeles. That county’s residents will continue to pay a $13 million bill annually through 2025, after the Raiders will have enjoyed several seasons in their new desert home.
Robinson notes that people don’t realize the unknown costs to Las Vegas beyond the $750 million, which will include public safety services around the stadium site and various road improvements that will be needed to accommodate the increased traffic.
“I’m actually more worried about where we’re going to get the money for the infrastructure improvements,” he said. “There’s a hidden cost in there.”
The convention capital draws more?
Area officials hope the stadium will help Las Vegas — already the convention capital of the nation — draw even more of those types of functions.
“They think we’ve lost a lot of convention business because we don’t have one place where you can put more than 40,000 people at the same time so there are some significant conventions we can’t get,” Robinson said.
A 2016 report from the Southern Nevada Tourism Infrastructure Committee (SNTIC) noted that tourism officials, resort representatives and event promoters said the area lacked a “state-of-the-art stadium with the seating capacity to lost large-scale events such as international soccer matches, national political conventions, NFL games, neutral-site college football games and large stadium concerts.”
SNTIC said in the report that although Las Vegas offers more hotel rooms than any other U.S. city, it needed a new stadium to keep up with the joneses — the joneses being such cities with relatively new stadiums as Houston, Phoenix, and Dallas.
“This equates to the potential loss of large events and the hundreds of millions of dollars in economic activity they would create,” the SNTIC wrote. “The region’s existing stadium, Sam Boyd Stadium, has undergone two major renovations since it was built in 1971; however, its current capacity of up to 40,000 spectators remains a limiting factor in attracting large events and enabling current events to expand.”
Robinson can envision an NCAA Basketball Tournament final being held in Las Vegas Stadium, but wouldn’t expect the NCAA to hold a second football bowl game in the city.
Schaus said Las Vegas is not a city that’s ever had trouble attracting conventions, and, in fact, is one of the things for which the city is well known.
“It seems possible they’ll get some new events, especially early on while the stadium is still new and exciting to everybody. Whether that continues is something else,” Schaus said. “That also raises the big question of does this town really have a problem attracting tourists and the obvious answer is no. So it seems kind of silly to be spending taxpayer dollars to do something the private sector has done exceptionally well.”
Flirting with professional sports
Las Vegas has long had a thirst for professional sports, but has found itself “sevening-out” on its efforts, largely due to concerns about locating teams in the only state in the country where betting on the games is legal.
But the stance on gambling is obviously softening, with the National Hockey League’s Golden Knights taking up residence in T-Mobile Arena this fall. NFL owners voted almost unanimously to allow the Raiders to move from Oakland to Las Vegas.
It comes somewhat of a surprise that the NHL and NFL are the first sports leagues to set up shop in Sin City, given the city’s long connections to Major League Baseball (through its minor-league team Las Vegas 51s, the AAA affiliate of the New York Mets) and the National Basketball Association (which holds its summer league exhibition series at the Thomas & Mack Center on the UNLV campus and has held its all-star game there).
In fact, there was a plan a decade ago by Harrah’s Entertainment (now Caesars Entertainment) to build a baseball stadium behind its Bally’s and Paris casino hotels, which later transitioned into a goal of building an arena in conjunction with Anschutz Entertainment Group (AEG) that might be suitable for an NBA team. But that plan never came to fruition. Eventually, AEG moved across the street by getting into bed with MGM Resorts and building T-Mobile Arena on the other side of the Strip.
The Raiders’ move to Las Vegas is largely thanks to the efforts of Nevada’s richest resident, casino magnate Sheldon Adelson, who isn’t even part of the deal any more after Raiders’ owner Mark Davis pushed out the chairman of Las Vegas Sands Corporation. Bank of America is now financing the Raiders’ portion of the stadium deal.